Three numbers that matter

Summary

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Unhedged – “Three numbers that matter”

Financial Times & Pushkin Industries
Released: December 18, 2025
Hosts: Katie Martin & Robert Armstrong

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Episode Overview

This episode of Unhedged delves into the true health of the US economy amid swirling uncertainty following a messy federal government shutdown. Hosts Katie Martin and Robert Armstrong focus on three key metrics shaping markets right now: employment, inflation, and financial system leverage. With plenty of wit, skepticism, and a dose of post-holiday-party honesty, they dissect whether “fine” economic data really means things are on steady ground—or if deeper risks are lurking.

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1. Jobs Data: Fine, not Great

Starts at 02:23

• Main Discussion:

  • November jobs data is finally out, delayed by the government shutdown, showing an unemployment rate ticked up to 4.6% (historically low, but trending the wrong way).
  • The jobs report is split into two parts:
    • Household Survey: Asks individuals if they’re employed, fired, or worked part time; showed a volatile uptick in temporary layoffs.
    • Establishment Survey: Asks businesses if they’re hiring; October saw a sharp drop (mainly due to government layoffs), while November rebounded mildly in private sectors.
  • The presenters agree job additions are “fine”—better than “meh”, but not spectacular.
  • Structural shifts (lower immigration, aging demographics) may mean fewer job additions are required to keep the labor market steady.

• Key Quotes:

  • “The headline…the FT landed on…was a higher unemployment rate at 4.6%. That is a relatively low historic number. But the trend is going the wrong direction.” – Robert Armstrong (02:23)
  • “In this low immigration, aging economy, it may be that just 10 or 20 or 30,000 job additions is enough to…keep the unemployment rate going sideways.” – Robert Armstrong (05:13)
  • “It’s a bit better than meh.” – Katie Martin (05:06)

• Notable Segment:

  • Discrepancy between expectations (fewer immigrants = more jobs for US citizens) and reality: “That’s not happening right now… What we know is that’s not happening.” – Robert Armstrong (06:07)

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2. Retail Sales & Consumer Spending: Just ‘Okay’

Starts at 06:19

• Consumer Confidence:

  • Retail sales are steady; inflation-adjusted, spending is up 1-2% year over year—“not spectacular, not accelerating, but it’s not falling through the floor.”
  • Cars are a weak spot, but excluding volatile categories like autos and petrol, the backdrop is stable.
  • The “paradox of thrift”—where households cutting back could become self-fulfilling economic gloom—isn’t fully in play…yet.

• Key Quote:

  • “Retail spending…is growing 1 or 2% year over year, which is okay.” – Robert Armstrong (07:19)

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3. Inflation: A Pleasant Surprise, But Don’t Celebrate Too Soon

Starts at 07:48

• Latest Data:

  • November inflation came in at 2.7% (lower than the 3.1% forecast).
  • Key driver: Housing (shelter) costs, which are controversial due to data lags and collection methods.
  • Services inflation remains above target (in the 3%+ range), so it’s not “mission accomplished.”

• Future Risks:

  • Katie expresses concern that tariffs and other factors could reignite inflation later in 2026.
  • Lower inflation makes it easier for the Fed to cut rates, but policy risk lingers:
    • Discussion turns humorous—and pointed—on the potential for a Trump-appointed Fed chair:
      • “I believe you said…we should get used to the idea that the next Fed chair will be Donald Trump wearing comedy glasses and pretending to be an economics professor.” – Robert Armstrong (10:24)
      • “It’ll be whoever does what Donald Trump wants him to do. That’s who it will be.” – Katie Martin (10:41)
      • Armstrong pushes back, suggesting that the Fed chair role is more insulated from political pressure than other appointments.

• Summing up inflation risk:

  • “To summarize, we’re above target for inflation now. The trend is sideways, maybe a tiny bit down if you squint. Next year, we get fiscal support and possibly monetary support, too...Does this push core inflation up a little bit next year and upset the whole house of cards... I think that’s a risk that is not high probability, but is high destructiveness.” – Robert Armstrong (13:02)

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4. Market Plumbing: Leverage and Systemic Risks

Starts at 13:24

• Financial Leverage:
  • A rarely discussed but critical number: $3.3 trillion in overnight secured financing (repos), whereby financial players borrow against Treasury holdings.
  • Surging leverage implies the potential for financial overstimulation—amplifying stock market rallies and, potentially, feeding inflation.
  • “There is some reason...we have a hot stock market next year, and that makes inflation risk worse.” – Robert Armstrong (13:36)

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5. Long/Short: Festive Gripes and Guilty Pleasures

Starts at 15:33

Hosts pick things they’re “long” (like) or “short” (dislike):

• Robert Armstrong:
  • Short Wham!’s “Last Christmas”
    • “If every recording of that song were to be lost in a fire, I would rejoice.” (15:54)
• Katie Martin:
  • Short Amusing Wall Street Festive Videos
    • Calls out Blackstone’s annual Christmas video: “It is cringe as an asset class. It’s where funny goes to die. It’s painful to watch.” (16:17)

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6. Memorable Moments & Tone

• The camaraderie & candor—including Armstrong’s playful jibes at Martin’s “slightly hungover” state (00:36), and their mutual eye-rolling about government missteps and market optimism.
• Satirical forecast for a Trump-appointed Fed chair in “comedy glasses.”
• Both hosts present “fine” as the reluctant verdict of 2025’s data: good enough for now, but not truly reassuring.
• A thread of underlying skepticism—reminding listeners not to “declare victory” on inflation yet, and to watch for lurking risks in leverage and policy.

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Key Timestamps

• 02:23 – Jobs data breakdown
• 06:19 – Retail sales & consumer sentiment
• 07:48 – November inflation surprise
• 10:24 – Joking about a Trumpist Fed chair
• 13:24 – Systemic financial leverage
• 15:33 – Long Short segment

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Summary Takeaway

The US economy of late 2025 is muddily “fine.” Job growth is stalled but not shrinking, consumer spending is tepid but stable, and inflation has unexpectedly cooled...for now. Yet foundational risks—ranging from political appointments to the scale of market borrowing—mean that “fine” is a word laced with anxiety. The episode ends with holiday humor but leaves listeners with a sober warning not to mistake stable data for lasting safety.

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Transcript

[PGM Narrator]

At PGM, our global perspective today unlocks investment opportunities tomorrow. Our 1400 investment professionals provide global expertise and local insights to help you navigate the complexities of a changing world. We offer a diverse range of active strategies across public and private markets to help you identify opportunities and achieve your long term goals. Pjum Our investments shape tomorrow today.

[Katie Martin]

Pushkin how healthy is the US Economy really? It's a tricky question to answer in all honesty because the economic data is still a bit screwy since the federal government shutdown earlier this year. If you are confused, don't worry because Donald Trump says it. It's great. We are poised for an economic boom the likes of which the world has never seen, he said this week. Poised. Maybe. The general public though is not convinced. People are worried about all sorts of things, inflation and that kind of thing, and they are cautious on spending. Today on the show inflation, jobs and market plumbing, we'll tell you the numbers that matter. This is Unhedged, the Markets and Finance podcast from the Financial Times and Pushkin, Katie Martin, a slightly hungover markets columnist with coffee built on my white top here at FT Towers in London. It's one of those days and I'm joined by the magic of the Internet by that guy, the very Reverend Robert Armstrong off the Unhedged newsletter.

[Robert Armstrong]

My head is clear as a bell and my shirt is spotless. I would just like the record to.

[Katie Martin]

Reflect I am very pleased for you.

[Robert Armstrong]

Rob.

[Katie Martin]

How is Christmas party season treating you though? Are you partied out yet?

[Robert Armstrong]

No, I'm still into it. We have the US Unhedged Christmas Christmas lunch today. Oh yeah, we're all gonna go out and eat goose and mince pies or something.

[Katie Martin]

And go wild.

[Robert Armstrong]

Yeah, and go wild. It'll be great.

[Katie Martin]

Yeah. I mean, when we're nearly there, folks, the year is almost, almost, almost over. But so yeah, what's the sense from over there about what the US Economy is really up to? Because it, it's a bit of a cloudy picture, isn't it?

[Robert Armstrong]

Yes, it is cloudy. Let's start with jobs. We did get a November jobs report and the headline that the FT landed on and everybody else landed on was a higher unemployment rate at 4.6%. That is a relatively low historic number. But the trend is going the wrong direction.

[Katie Martin]

So this is weird, isn't it? This is the payrolls data that we normally get on the first Friday of every month.

[Robert Armstrong]

Yes.

[Katie Martin]

Like this is like just metronomically like everybody knows that's when the payrolls data comes out. But because of this whole Stupid situation you had.

[Robert Armstrong]

Yeah, we shut down the government for reasons that no one remembers any longer, but we did. And so now the. All the important economic reports are coming out, sort of when they come out, we're playing catch up. So anyway, we have November numbers. We are hoping we can rely on them. Fingers crossed. And the unemployment rate, which you figure out by literally going to households, calling people up and saying, have you been fired? And you create the sample or hired? Or did you go to part time work and you do the sample that way? That ticked up a little bit. That may have. There was an unusually high number of people who said they were on temporary layoff in that, in that survey. And that's a volatile number. And that may reverse and we may go back down to 4.5 or whatever. But again, the trend there is not great. The other half of the jobs report comes from calling not households, but bosses, companies, and saying, are you hiring? How many people have you hired? Et cetera, et cetera. And that side of the survey is a bit confusing because we had all the doge Department of Government efficiency driven government layoffs officially landed in October. So we had this huge drop in October and then a few stragglers in November. So for that side of things, the payroll numbers, you have to kind of put aside the government. Right. Because the federal government is kind of doing all this crazy stuff that hopefully it won't do again. And if you just look at private employers, things are okay. You know, the, the numbers are positive. We're adding, you know, in, in on average in the last six months. You're adding kind of 50 to 100,000 jobs maybe a month in that neighborhood, which is, I use the word fine and not fine with the like a smile and exclamation point. The kind of the like, okay, fine sense of fine. You know, so it's fine.

[Katie Martin]

It's a bit better than meh.

[Robert Armstrong]

We notched up from meh to fine.

[Katie Martin]

Yeah, yeah.

[Robert Armstrong]

And part of the reason here, of course, as we've discussed on the show before, we have this big change in immigration. We have aging demographics. So there is an ongoing mystery about how many job additions is enough for the economy to be in a steady state. In this low immigration, aging economy, you know, it may be that just 10 or 20 or 30,000 job additions is enough to kind of keep the economy and the unemployment rate going sideways.

[Katie Martin]

But it is interesting, isn't it, that the unemployment rate is ticking higher at a time when, as you say, immigration is lower and people are getting kicked out of the country. Surely the opposite should be happening according to this whole framework that tightening immigrants are stealing jobs and.

[Robert Armstrong]

Yes, so you know, you can give.

[Katie Martin]

More jobs to American citizens.

[Robert Armstrong]

That's not, that's not happening right now. I hear your argument. What we know is that's not happening, right? Maybe it will happen eventually. That is not happening now.

[Katie Martin]

Huh.

[Robert Armstrong]

So anyway, I think that's fine. And the figure I would combine that with the way, the way a bad thing happens to economy is the job market weakens, households either are less employed or underemployed or are worried about being underemployed and then they start being thrifty and so consumer spending falls and then you get a cycle of bad things happening. Kind of paradox of thrift stuff where everybody saving makes the whole thing worse. And speaking of fine, I would put the same. We got a retail sales report this week too, and that looks pretty steady. You know, it depends a little bit how you cut it or whatever, but in real terms, in inflation adjusted terms, retail spending, you know, is growing 1 or 2% year over year, which is, which is okay.

[Katie Martin]

It's okay.

[Robert Armstrong]

It's not spectacular, it's not accelerating, but it's not falling through the floor and it'll be okay. The exception to this is cars, which people are not buying with much enthusiasm, but there seem to be some one off effects in there and we're hoping that gets better. But if you exclude cars and petrol, as you would call it in your strange little island, then things look okay on the spending front. So these are good, solid pieces of news, I would say. No, I'm sorry, I take it back. Not solid, fine.

[Katie Martin]

Okay, so that's fine. But then the other really sort of meaningful bit of US economic data is always inflation, of course. And you know, I'm one of these people that remains somewhat concerned that maybe inflation could still push higher at a certain point next year and that some of the impact of the tariffs hasn't quite fed through yet. And maybe we're all a little bit complacent about, about inflation, but latest release this week, US inflation fell to 2.7% in November, which was not what economists have been expecting. So expectations were for inflation to be at 3.1%. It's actually at 2.7, which is a decent chunk lower.

[Robert Armstrong]

So a lot of that was housing. And we can have a long, extremely tiresome debate about whether housing should be included in this number or not because of some annoying details about how that data is collected and how much it lags in time or Whatever. So a very, very benign shelter inflation number pulled the overall CPI inflation number down. The news overall was still good. But for example, services inflation, which is a chunky bit if you take housing out, was still well above, you know, in the 3 percentage range, above target. Right. So we're still not a target. But that's. I don't want to discount this thing. This was good news, as you know. My. I'm very worried about inflation. I was very happy to see a lower number, whatever little amendments or buts you want to attach to it. I thought it was good news. But yeah, because inflation, everything counts. All the good things that can happen to the US Economy depend on inflation not spiking up again.

[Katie Martin]

Yes.

[Robert Armstrong]

Nothing else kind of works. Most obviously, if inflation spikes up again, the Fed can't cut rates and everything that follows from that.

[Katie Martin]

That gets very sticky as well, doesn't it? Because next year, as we've discussed before, Jay Powell, chair of the Fed, he stands aside the. There'll be some sort of Trump sympathizer who will be put into that job. And effectively this person's job will be cut the rates. I don't care how you want to dress this thing up, just, just cut the race.

[Robert Armstrong]

Yeah. I believe you said on the Internet that we should get used to the idea that the next Fed chair will be Donald Trump wearing comedy glasses and pretending to be an economics professor.

[Katie Martin]

Yes. I think that's all this kind of.

[Robert Armstrong]

I think that's a little extreme, Katie.

[Katie Martin]

But it's like, who will the next chair of the Fed be? You know, will it be Kevin Hassett? Will it be Kevin Walsh? Will it be Christopher Waller? Who will it be? It's going to be Donald Trump. Like, I don't know why we're all pretending it's not going to. It'll be whoever does what Donald Trump wants him to do. That's who will be.

[Robert Armstrong]

Well, I'll agree with you that it will be whoever is the most lick spiddly in the interview will win.

[Katie Martin]

Yes, Yes.

[Robert Armstrong]

I just have the naive belief that once you get in that job, your attitude changes. You're basically suddenly at an arm's length for the president, where once you are his complete underling, you get into that Fed chair, you've got some insulation. And I think people start to have ideas of their own once they get that job. So I am not taking the Katie Martin, Donald Trump in comedy glasses view of the next Fed chair, although it is a funny image and one that I will treasure in the new year.

[Katie Martin]

Can you point to any other Trump appointees who have gone their own way after their appointment.

[Robert Armstrong]

And no job is as well insulated from the president as the Fed chair's job. That's different from being a Treasury secretary or a defense secretary or whatever, the secretary of comedy glasses or whatever. It is different, very different.

[Katie Martin]

But, but, you know, the fact that we have got inflation that's somewhat lower than people have been expecting means that kind of whoever this person ends up being, and we are expecting an announcement pretty soon on who it will be, it is easier for them to execute this plan of cutting interest rates.

[Robert Armstrong]

And they should, if inflation falls, they should cut interest rates. It's fine. That's what they should do. Now, the worry is, the worry is that next year that inflation doesn't, inflation, we know historically does not proceed in a straight line. And you get into next year and a couple things happen. We cut rates. The big beautiful bill stimulates the economy. And, you know, maybe for reasons that are internal to the economy, things get a little bit better, consumer confidence improves and the kind of pressure from demand increases and inflation changes direction. So the, to summarize, we're above target for inflation now. The trend is sideways, maybe a tiny bit down if you squint. Next year, we get fiscal support and possibly monetary support, too. We also have other things that are stimulating the economy, like a low oil price. Does this push core inflation up a little bit next year and upset the whole house of cards or upend the dinner table or whatever metaphor you want to use? I think that's a risk that is not high probability, but is high destructiveness, and we need to worry about that. So inflation is a problem. And what could make it worse is a hot stock market. And I think there is some reason, I know people are worried, is the bubble going to pop? I'm slightly worried about the opposite thing, that we have a hot stock market next year, and that makes inflation risk worse. And the reason, the key reason I think we could have a hot stock market is there's a huge amount of leverage in the financial system. In other words, there's lots of borrowable money that people are using to buy financial assets. So that brings us to that $3.3 trillion number, which is the volume of overnight secured financing. And I know that sounds terribly nerdy, but that is basically people in the market borrowing against their treasury holdings to get cash to buy other financial assets with. And this market has gone bananas. So we have this insatiable appetite for leverage in the financial market, which could make prices rise and create more inflationary pressure. So I think that's something to watch is the amount of leverage in the financial system is a key factor in the background here.

[Katie Martin]

Yeah, short term, the number, you know, the inflation number may have come down, but I would not declare victory yet. I am however declaring that we're going to be back in just a sec with Long Short.

[PGM Narrator]

At pjum. Our global perspective today unlocks investment opportunities tomorrow. Our 1400 investment professionals provide global expertise and local insights to help you navigate the complexities of a changing world. We offer a diverse range of active strategies across public and private markets to help you identify opportunities and achieve your long term goals. PGM Our investments shape tomorrow today.

[Katie Martin]

Okey dokey people, it is time for Long Short. That part of the show where we go long a thing we love or short a thing we hate. Rob, what you got?

[Robert Armstrong]

Katie? I'm short wham's Christmas Carol Last Christmas. I was thinking about this on the way into work. What is the worst Christmas song ever recorded?

[Katie Martin]

What?

[Robert Armstrong]

And Wham's Last Christmas is it? I am short that if every recording of that song were to be lost in a fire, I would rejoice.

[Katie Martin]

George Michael is a national treasure over here.

[Robert Armstrong]

I like Wham in general, which makes it all the more painful to listen to that the worst of all Christmas songs.

[Katie Martin]

Well, I am short Amusing Wall street festive videos. I regret to inform you that Blackstone has made one again. It's like an annual tradition where these like private equity firms try and be amusing on the Internet and jolly and light hearted about the festive season. And it's. It is cringe as an asset class. It's where funny goes to die. It's painful to watch.

[Robert Armstrong]

Nothing like a billionaire in a Santa hat to piss you off. Tell you that. It's like the worst.

[Katie Martin]

Danny DeVito was in it. It's like what are you doing dude? Like, it's. This is. This is violence. It must stop. No more amusing festive videos from private equity companies please listeners. That is it for today. We are going to be back in your ears on Tuesday with a special show. So listen up then. Unhedged is produced by Jake Harper and edited by Bryant Urstadt. Our executive producer is Jacob Goldstein. Topher ForHees is the FT's acting co head of Audio. Special thanks to Laura Clark, Alasdair Mackey, Greta Cohn and Natalie Sadler. FT Premium subscribers can get the Unhedged newsletter for free. A 30 day free trial is available to everyone else. Just go to ft.com unhedgedoffer I'm Katie Martin. Thanks for listening, Sam.